Perspectives on Global Development 2012

Social Cohesion in a Shifting World

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“Shifting wealth” – a process that started in the 1990s and took off in the 2000s – has led to a completely new geography of growth driven by the economic rise of large developing countries, in particular China and India. The resulting re-configuration of the global economy will shape the political, economic and social agendas of international development as those of the converging and poor countries for the years to come.

This report analyses the impact of “Shifting wealth” on social cohesion, largely focusing on high-growth converging countries. A “cohesive” society works towards the well-being of all its members, creates a sense of belonging and fights against the marginalization within and between different groups of societies. The question this report asks is how does the structural transformation in converging economies affect their “social fabric”, their sense of belonging or put generally their ability to peacefully manage collective action problems.

Recent events in well performing countries in the Arab world but also beyond such as in Thailand, China and India seem to suggest that economic growth, rising fiscal resources and improvements in education are not sufficient  to create cohesion; governments need to address social deficits and actively promote social cohesion if long-term development is to be sustainable.   

English Also available in: French

Sustainable Fiscal Policies for Stronger Social Contracts

OECD Development Centre

Shifting wealth increases the availability of resources in many converging countries, creating a window of opportunity to foster social cohesion. Fast economic growth and structural change are producing more development finance flows in converging countries where tax revenues have outpaced those of other developing countries. However, for opportunities to materialise, converging economies must take determined steps to create a stable source of financing by increasing fiscal legitimacy. The current situation in many converging economies is characterised by the state’s low legitimacy as an honest broker between different interest groups, limiting public sector effectiveness in delivering essential services for reducing inequalities and fostering social cohesion. Public policies to increase social cohesion require stable financing and time to mature. Fiscal policies and institutions that loosen the link between current levels of revenue and expenditure – e.g. rainy-day funds that save a share of windfall revenues to maintain social expenditures during bad times – are effective tools for dealing with this challenge. Financing inter-generational redistribution like social pensions out of such funds can foster social cohesion and create a constituency for stable fiscal policy.

English Also available in: French

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